Amendments in Income Tax Act effected by the Finance Act 2023

Table of Contents

1. Tax Rates

2. Amendment to Section 2

3. Gift to not Ordinarily Resident [Sec. 9(1)(viii)]

4. Amendment to Section 10(4D)

5. Amendment to Section 10(4E) to Eliminate Double Taxation of Income from Offshore Derivative Instruments

6. Amendment to Section 10(4G)

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1. Tax Rates

Tax rates under the regular tax regime for the assessment years 2023-24 and 2024-25 are given in Annex 1. Tax rates under the alternative tax regime under section 115BA/115BAA/115BAB/115BAC/115BAD/115BAE are given in paras 531 to 559. Alternative tax regime is optional [one has to exercise the option under section 115BA(4)/115BAA(5)/115BAB(7)/115BAC(5)/115BAD(5)/115BAE(5) to avail the benefit of alternative tax regime]. However, in the case of an individual/HUF/AOP/BOI/artificial juridical person, the alternate tax regime is the default tax regime from the assessment year 2024-25 [one has to exercise the option under section 115BAC(6) to avail the benefit of the regular tax regime].

1.1 Income Tax

The following are income-tax rates for the assessment years 2023-24 and 2024-25:

1.1.1 Individual/HUF/AOP/BOI/Artificial Juridical Person

Tax rates pertaining to these assessees are as follows:

• Regular Tax Regime: Exemption limit is Rs. 2,50,000¹ (it is applicable even in the case of a resident woman). Higher exemption limit is applicable in the case of a senior citizen or super senior citizen.

1. Senior citizen: Senior citizen is a resident individual who is at least 60 years of age at any time during the previous year but less than 80 years on the last day of previous year [assessment year 2023-24 (date of birth: on or after April 2, 1943 but before April 2, 1963) or assessment year 2024-25 (date of birth: on or after April 2, 1944 but before April 2, 1964)].

In the case of a senior citizen, exemption limit is Rs. 3,00,000¹. Net income in the range of Rs. 3,00,000 to Rs. 5,00,000 is taxable at the rate of 5 per cent. Between Rs. 5,00,000 and Rs. 10,00,000, the slab rate is 20 per cent and the income exceeding Rs. 10,00,000 is taxable at the rate of 30 per cent. These rates are applicable only in the case of a resident (ordinarily or otherwise) senior citizen. In the case of a non-resident senior citizen, the exemption limit is Rs. 2,50,000 as given below.

2. Super senior citizen: A super senior citizen is a resident individual who is at least 80 years of age at any time during the previous year [assessment year 2023-24 (date of birth: before April 2, 1943) or assessment year 2024-25 (date of birth: before April 2, 1944)].

In the case of super senior citizen, first Rs. 5,00,000 of net income is exempt from tax. Net income in the range of Rs. 5,00,000 to Rs. 10,00,000 is taxable at the rate of 20 per cent. Net income exceeding Rs. 10,00,000 is taxable at the rate of 30 per cent. These rates are applicable only in the case of a resident (ordinarily or otherwise) super senior citizen. In the case of a non-resident, the exemption limit will be Rs. 2,50,000 as given below.

3. Any other individual, any HUF/AOP/BOI – This category includes the following taxpayers –

1. 1. 1. Any other resident individual [assessment year 2023-24 (date of birth: on or after April 2, 1963) or assessment year 2024-25 (date of birth: on or after April 2, 1964)].
      2. Any non-resident individual irrespective of age.
      3. Any HUF, AOP, BOI, artificial juridical person.

In case of any of these assessees, first Rs. 2,50,000¹ of net income is exempt from tax. Net income in the range of Rs. 2,50,000 to Rs. 5,00,000 is taxable at the rate of 5 per cent. On net income between Rs. 5,00,000 and Rs. 10,00,000, the slab rate is 20 per cent and income exceeding Rs. 10,00,000 is taxable at the rate of 30 per cent.

• Alternative Tax Regime: An individual/HUF can opt for the alternative tax regime under section 115BAC for the assessment year 2023-24. However, for an individual/HUF/AOP/BOI/artificial juridical person (for the assessment year 2024-25), the alternative tax regime is the default tax regime. One can exercise the option under section 115BAC(6) to avail the benefit of regular tax regime². Tax rates under the alternative tax regime are as follows:

1.1.2 Firm

There is no change in the tax rate. A partnership firm (including a limited liability partnership firm) is taxable at the rate of 30 per cent.

1.1.3 Company

A domestic company is taxable at the rate of 30 per cent and a non-domestic company is taxable at the rate of 40 per cent. Different rates are, however, applicable in the following cases–

1. A domestic company (where its total turnover or gross receipt in the previous year 2020-21 does not exceed Rs. 400 crore) is taxable at the rate of 25 per cent (not 30 per cent) for the assessment year 2023-24.
2. A domestic company (where its total turnover or gross receipt in the previous year 2021-22 does not exceed Rs. 400 crore) will be taxable at the rate of 25 per cent (not 30 per cent) for the assessment year 2024-25.

• • Alternative tax regime for a domestic company: A domestic company can opt for the alternative tax regime provided under section 115BA or section 115BAA or section 115BAB².

1.1.4 Co-operative Society and Local Authority

In the case of a co-operative society/local authority, there is no change in the income-tax rates. These rates are given in para 0.1-4, Annex 1.

• Alternative tax regime for a resident co-operative society – A resident co-operative society can opt for the alternative tax regime provided under section 115BAD or section 115BAE².

1.2 Surcharge on Income Tax

Applicable surcharge (as a percentage of income-tax) for the assessment years 2023-24 and 2024-25 is as follows^3a –

Note – The above surcharge is subject to a marginal relief.

1.2.1 Surcharge when Individual/HUF/AOP, etc., has Dividend Income or Income Taxable Under Section 111a/112/112a

Surcharge for the assessment years 2023-24 and 2024-25^3a is as follows –

Where the total income includes any dividend income and/or income chargeable under section 111A/112/112A the rate of surcharge on the amount of income-tax computed on that part of income, shall not exceed 15 per cent. Moreover, in the case of an AOP (consisting of only companies as its members), the rate of surcharge on the amount of income-tax shall not exceed 15 per cent. Further, in the case of an individual/HUF/AOP/BOI/artificial juridical person, surcharge (if tax is payable under the alternative tax regime) cannot exceed 25 per cent for the assessment year 2024-25.

It has been clarified by CBDT that the derivatives (future and options) are not treated as capital assets and the income arising from the transfer of the derivatives is treated as business income and is liable for normal rate of tax (and such case will fall in the 4th column of the above table). However, in the case of Foreign Institutional Investors (FPI), the derivatives are treated as capital assets and the gains arising from the transfer of the same are treated as capital gains and are subject to a special rate of tax as per the provisions of section 115AD. Consequently, surcharge on income-tax payable on gains arising from the transfer of derivatives (future and options) by FPI which are liable to special rate of tax under section 115AD, cannot exceed 15 per cent (it will fall under 3rd column of the aforesaid table).

1.2.2 Surcharge when a Domestic Company Pays Tax Under Section 115BAA or Section 115BAB

In the case of a domestic company which has opted for the alternative tax regime under section 115BAA or 115BAB, surcharge is 10 per cent of income-tax for the assessment years 2023-24 and 2024-25 (regardless of quantum of income)^3a.

1.2.3 Surcharge when a Resident Co-operative Society Pays Tax Under Section 115BAD/115BAE

In the case of a resident co-operative society which has opted for the alternative tax regime under section 115BAD or section 115BAE, surcharge is 10 per cent of income-tax for the assessment years 2023-24 and 2024-25 (regardless of quantum of income)^3a.

1.3 Health and Education Cess on Income Tax

For the assessment years 2023-24 and 2024-25, health and education cess (HEC) is 4 per cent of income-tax and surcharge^3a.

1.4 Minimum Alternate Tax/Alternate Minimum Tax

A corporate-assessee is covered by minimum alternate tax under section 115JB. A non-corporate assessee is covered by alternate minimum tax under section 115JC. However, minimum alternate tax/alternate minimum tax is not applicable if tax is payable under the alternative tax regime under section 115BAA/115BAB/115BAC/115BAD/115BAE.

• Tax rate – Basic rate for minimum alternate tax is 15 per cent and alternate minimum tax is 18.5 per cent (15 per cent for co-operative society) for the assessment years 2023-24 and 2024-25. If a unit is located in an International Financial Services Centre⁴ and derives its income solely in convertible foreign exchange, the minimum alternate tax/alternate minimum tax is 9 per cent of book profit.
• Surcharge – Surcharge^3a on minimum alternate tax/alternate minimum tax is as follows –

Notes –

1. Surcharge (given above) is subject to a marginal relief.
2. In the case of an AOP (having only companies as its members), surcharge cannot exceed 15%.

• • HEC – HEC is 4 per cent of minimum alternate tax/alternate minimum tax and surcharge.

1.5 Marginal Relief

The provisions pertaining to marginal relief are given below –

• Individual/HUF/AOP/artificial juridical person having income above Rs. 50 lakh – In the case of these taxpayers, if income is slightly higher than Rs. 50 lakh, a provision has been made to provide for relief in marginal cases. The said relief is as follows –

If the net income exceeds Rs. 50 lakh, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a net income of Rs. 50 lakh by more than the amount of income that exceeds Rs. 50 lakh.

• Individual/HUF/AOP/artificial juridical person having income between Rs. 1 crore and Rs. 2 crore – In the case of these taxpayers, if income exceeds Rs. 1 crore but does not exceed Rs. 2 crore, the applicable surcharge will increase from 10 per cent to 15 per cent. Marginal relief is provided when net income is slightly higher than Rs. 1 crore which is as given below –

If net income of these taxpayers exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

• Individual/HUF/AOP/artificial juridical person having income between Rs. 2 crore and Rs. 5 crore – In the case of these taxpayers, if income exceeds Rs. 2 crore but does not exceed Rs. 5 crore, the applicable surcharge will increase from 15 per cent to 25 per cent. Marginal relief is provided when net income is slightly higher than Rs. 2 crore which is as given below –

If net income of these taxpayers exceeds Rs. 2 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 2 crore by more than the amount of income that exceeds Rs. 2 crore.

• Individual/HUF/AOP/artificial juridical person having income exceeding Rs. 5 crore – In the case of these taxpayers, if income is more than Rs. 5 crore, the applicable surcharge will increase from 25 per cent to 37 per cent which is subject to marginal relief as follows –

If net income of these taxpayers exceeds Rs. 5 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 5 crore by more than the amount of income that exceeds Rs. 5 crore.

• Firms/local authorities having income above Rs. 1 crore – To avoid hardship, in the case of these taxpayers (having income of above Rs. 1 crore), a provision has been made to provide for relief in marginal cases. The said relief is as follows –

If the net income exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a net income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

• Domestic company/foreign company/co-operative society having income above Rs. 1 crore – In the case of a company/co-operative society, surcharge is not applicable if net income does not exceed Rs. 1 crore. If net income exceeds Rs. 1 crore, surcharge is applicable.

To avoid hardship, in the case of a company/co-operative society whose income is slightly higher than Rs. 1 crore, a provision has been made to provide for relief in marginal cases. The said relief is as follows –

If the net income exceeds Rs. 1 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a net income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

• Domestic company/foreign company/co-operative society having income above Rs. 10 crore – In the case of a company/co-operative society, if net income is more than Rs. 10 crore, the applicable surcharge will increase from 7 per cent to 12 per cent (in the case of foreign company, it increases from 2 per cent to 5 per cent). Consequently, another marginal relief is provided when net income is slightly higher than Rs. 10 crore which is as given below –

If the net income of a company/co-operative society exceeds Rs. 10 crore, the total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on net income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore.

1.5.1 Income Range when Marginal Relief is Applicable

Marginal relief will be applicable in case net income falls in the following range –

Note: The above net income ranges will remain valid only if the assessee does not have any income which is chargeable to tax at special rate(s) of tax (e.g., long-term capital gains, short-term capital gains under section 111A, lottery income, etc.).

In the case of alternate minimum tax/minimum alternate tax, the marginal relief will be applicable in case adjusted total income/book profit falls in the following range for the assessment years 2023-24 and 2024-25 –

1.6 Maximum Marginal Tax Rates

Maximum marginal tax rates (at highest level) for the assessment years 2023-24 and 2024-25 are given in the table below –

1.7 Rates for Tax Deduction/Collection at Source

During the financial year 2023-24, tax will be deducted at source under section 192/194P at the rate given in para 0.1-1, Annex 1. TDS rates for payments other than salary are given in para 0.6 of Annex 1. TCS rates are given in para 0.7 of Annex 1.

1.7.1 Surcharge, Education Cess, etc., in the Case of TDS/TCS

For the financial year 2023-24, these rates are as follows –

Notes –

1. If amount subject to TDS exceeds Rs. 50 lakh but does not exceed Rs. 1 crore, surcharge is 10 per cent of TDS. If it exceeds Rs. 1 crore but does not exceed Rs. 2 crore, surcharge is 15 per cent of TDS. If it exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is 25 per cent of TDS. If it exceeds Rs. 5 crore, surcharge is 37 per cent (25 per cent under alternative tax regime) of TDS.
2. If the recipient is a non-resident (individual/HUF/AOP/artificial juridical person) and the payment/credit subject to TDS exceeds Rs. 50 lakh but does not exceed Rs. 1 crore, surcharge is 10 per cent of TDS. If it exceeds Rs. 1 crore but does not exceed Rs. 2 crore, surcharge is 15 per cent of TDS. If it exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is 25 per cent of TDS. If it exceeds Rs. 5 crore, surcharge is 37 per cent (25 per cent under alternative tax regime) of TDS. If the recipient is a non-resident firm and the payment/credit subject to TDS exceeds Rs. 1 crore, surcharge is 12 per cent of TDS. If the recipient is a non-resident co-operative society and the payment subject to TDS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 7 per cent of TDS (it is 12 per cent of TDS if the payment/credit exceeds Rs. 10 crore). If the recipient is a foreign company and the payment subject to TDS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 2 per cent of TDS (it is 5 per cent of TDS if the payment/credit exceeds Rs. 10 crore).
3. If the purchaser/licensee/lessee is a non-resident (individual/HUF/AOP/artificial juridical person) and the amount subject to TCS exceeds Rs. 50 lakh but does not exceed Rs. 1 crore, surcharge is 10 per cent of TCS. If it exceeds Rs. 1 crore but does not exceed Rs. 2 crore, surcharge is 15 per cent of TCS. If it exceeds Rs. 2 crore but does not exceed Rs. 5 crore, surcharge is 25 per cent of TCS. If it exceeds Rs. 5 crore, surcharge is 37 per cent (25 per cent under alternative tax regime) of TCS. If the purchaser/licensee/lessee is a non-resident firm and the amount subject to TCS exceeds Rs. 1 crore, surcharge is 12 per cent of TCS. If the purchaser/licensee/lessee is a non-resident co-operative society and the amount subject to TCS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 7 per cent of TCS (it is 12 per cent of TCS if the amounts subject to TCS exceeds Rs. 10 crore). If the purchaser/licensee/lessee is a foreign company and the amount subject to TCS exceeds Rs. 1 crore but does not exceed Rs. 10 crore, surcharge is 2 per cent of TCS (it is 5 per cent of TCS if the amounts subject to TCS exceeds Rs. 10 crore).
4. If deductee/collectee is a non-resident AOP (having only companies as its members), rate of surcharge cannot exceed 15%.

Example 1: X (41 years) is a resident individual. His net income for the assessment year 2023-24 or 2024-25 is Rs. 5,30,00,000 (Situation 1), or Rs. 5,31,00,000 (Situation 2). X does not want to pay tax within the parameters of the alternative tax regime under section 115BAC.

Example 2: X Find out the tax liability in the cases given below for the assessment year 2023-24 or 2024-25 [these taxpayers do not want to opt for (or pay tax under) the alternative tax regime under section 115BAC] –

Assume that in the aforesaid cases, applicable tax rate under section 112 is 20 per cent.

Tax liability in the case of X – Total income of X (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 50 lakh but does not exceed Rs. 1 crore. It is covered by Situation 2. Applicable surcharge in this case is 10% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A as well as other incomes). Tax liability will be as follows –

Tax liability in the case of Y – Total income of Y (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 1 crore but does not exceed Rs. 2 crore. It is covered by Situation 3. Applicable surcharge in this case is 15% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A as well as other incomes). Tax liability will be as follows –

Tax liability in the case of Z – Total income of Z (excluding income taxable under sections 111A, 112 and 112A and dividend income) exceeds Rs. 2 crore but does not exceed Rs. 5 crore. It is covered by Situation 4. Applicable surcharge in this case is 15% on income-tax pertaining to income taxable under sections 111A, 112 and 112A and dividend income and 25% on other incomes. Tax liability will be as follows –

Tax liability in the case of A – Total income of A (excluding dividend income and income taxable under sections 111A, 112 and 112A) exceeds Rs. 5 crore. It is covered by Situation 5. Applicable surcharge in this case is 15% on income-tax pertaining to income taxable under sections 111A, 112 and 112A and dividend income and 37% on other incomes. Tax liability will be as follows –

Tax liability in the case of B – Total income of B (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 2 crore. It is not covered by Situation 1, 2 or 3. His total income (excluding income taxable under sections 111A, 112 and 112A) does not exceed Rs. 2 crore. Even Situations 4 and 5 are not applicable. Consequently, it is covered by Situation 6. Applicable surcharge in this case is 15% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A) and 15% on other incomes. Tax liability will be as follows:

Tax liability in the case of C – Total income of C (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 5 crore. However, it is not covered by Situations 4 and 5. Consequently, Situation 6 is applicable. Surcharge in this case is 15% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A) and 15% on other incomes. Tax liability will be as follows –

Tax liability in the case of D – Total income of D (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 50 lakh but does not exceed Rs. 1 crore. It is covered by Situation 2. Applicable surcharge in this case is 10% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A as well as other incomes). Tax liability will be as follows –

Tax liability in the case of E – Total income of E (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 1 crore but does not exceed Rs. 2 crore. It is covered by Situation 3. Applicable surcharge in this case is 15% (on income-tax pertaining to income taxable under sections 111A, 112 and 112A as well as other incomes). He is non-resident. His tax liability will be as follows –

Tax liability in the case of F – Total income of F (including income taxable under sections 111A, 112 and 112A) does not exceed Rs. 50 lakh. It is covered by Situation 1. Surcharge is not applicable in this case and tax liability will be as follows –

Tax liability in the case of G – Total income of G (including income taxable under sections 111A, 112 and 112A) exceeds Rs. 5 crore. However, it is not covered by Situations 4 and 5. Consequently, Situation 6 is applicable. Surcharge in this case is 15% (on income-tax pertaining to section 112A as well as other incomes). Tax liability will be as follows –

Example 3: X (40 years) and Y (64 years) are resident individuals and report the following income pertaining to the assessment year 2023-24 or 2024-25 (these taxpayers do not want to pay tax under the alternative tax regime under section 115BAC) –

Example 4: X Ltd. is a domestic company. Its turnover during the previous year 2021-22 was Rs. 398 crore. Net income of the company for the assessment year 2024-25 is Rs. 10.15 crore (Situation 1), or Rs. 10.20 crore (Situation 2). Minimum alternate tax is not applicable as book profit is Rs. 21,00,000. X Ltd. has not opted for the alternative tax regime under section 115BAA or section 115BAB.

Example 5: X Ltd. is a domestic company. The company has a manufacturing unit situated in Maharashtra. Turnover of the company in the previous year 2021-22 exceeded Rs. 400 crore. Income of the company for the assessment year 2024-25 is as follows (X Ltd. has not opted for the alternative tax regime under section 115BA or section 115BAA or section 115BAB) –

2. Amendment to Section 2

The following amendments have been made to the provisions of section 2.

• Deputy Commissioner (Appeals) – Section 2(19B) has been amended (with effect from April 1, 2023) to omit “Additional Commissioner of Income-tax (Appeals)” from the definition of “Deputy Commissioner (Appeals)”.
• Definition of “income” under section 2(24) – Section 2(24) has been amended (with effect from the assessment year 2024-25) to include the following within the definition of “income” –

1. 1. Sum received by a unitholder from a business trust – Sub-clause (xviic) has been inserted in section 2(24) to provide that sum received by a unitholder from a business trust [referred to in section 56(2)(xii)] shall also be included in the definition of income.
   2. Sum received under a life insurance policy – Sub-clause (xviid) has been inserted in section 2(24) to provide that income shall include any sum received under a life insurance policy referred to in section 56(2)(xiii).

• Definition of Joint Commissioner (Appeals) – Clause (28CA) has been inserted in section 2 (with effect from April 1, 2023) to provide for definition of “Joint Commissioner (Appeals)” to mean a person appointed to be a Joint Commissioner of Income-tax (Appeals) or an Additional Commissioner of Income-tax (Appeals) under section 117(1).
• Short-term capital asset – Section 2(42A) defines “short-term capital asset” and the Explanation 1 of the said section provides for determining the period for which any capital asset is held by an assessee.

Explanation 1 has been amended (with effect from the assessment year 2024-25) to provide that in the case of Electronic Gold Receipt or gold (being capital asset), the holding period for the purpose of capital gain shall include the period for which the gold or Electronic Gold Receipt, was held by the assessee prior to conversion into Electronic Gold Receipt or gold, as the case may be.

3. Gift to not Ordinarily Resident [Sec. 9(1)(viii)]

Section 9 specifies those incomes which are deemed to accrue or arise in India regardless of their actual place of accrual. The Finance (No. 2) Act, 2019 inserted clause (viii) to section 9(1) to provide that the any sum of money exceeding Rs. 50,000 received by a non-resident without consideration from a resident person (on or after July 5, 2019) shall be income deemed to accrue or arise in India. The amendment was made to check tax avoidance, as certain instances were observed where gifts were being made by persons residents in India to non-residents and were claimed to be non-taxable in India by such non-residents.

• Gift received by a resident but not ordinarily resident – A resident but not ordinarily resident individual/HUF is chargeable to tax in India on income received (or deemed to be received) in India or income which accrues or arises (or is deemed to accrue or arise) in India. Besides, such individual/HUF is also chargeable to tax in India in respect of business income (which arises from a business controlled from India) or professional income (which arises from a profession set up in India) even if place of accrual/receipt is outside India. Gift of money (exceeding Rs. 50,000) received by such assessee outside India from a person resident in India, is not taxable even after the amendment made by the Finance (No. 2) Act, 2019.
• Amendment – Section 9(1)(viii) has been amended (with effect from the assessment year 2024-25) to extend this deeming provision to sum of money (exceeding Rs. 50,000) received by a not ordinarily resident without consideration from a person resident in India. After this amendment, gift of money (exceeding Rs. 50,000 in a financial year) by a person resident in India to an individual/HUF (who is resident but not ordinarily resident in India) will be taxable in India if such gift is made on or after April 1, 2023. However, section 9(1)(viii) does not cover gift of any other property (movable or immovable). Consequently, the following are not covered by the deeming provisions of section 9(1)(viii) even if transferor is a person resident in India –

– Transfer of immovable property without consideration to a non-resident/not ordinarily resident.

– Transfer of immovable property for inadequate consideration to a non-resident/not ordinarily resident.

– Transfer of movable property without consideration to a non-resident/not ordinarily resident.

– Transfer of movable property for inadequate consideration to a non-resident/not ordinarily resident.

4. Amendment to Section 10(4D)

International Financial Services Centre Authority (Fund Management) Regulations, 2022 has come into force from May 19, 2022. To bring the reference of the said regulation, the definition of “specified fund” under section 10(4D) has been modified to include the reference of IFSCA (Fund Management) Regulations, 2022, with effect from the assessment year 2023-24.

5. Amendment to Section 10(4E) to Eliminate Double Taxation of Income from Offshore Derivative Instruments

Income of a non-resident is not taxable under section 10(4E) –

1. if it arises on transfer of offshore derivative instruments (ODI), and
2. such transaction is entered into with an offshore banking unit of an International Financial Services Centre (IFSC).

Under the ODI contract, the IFSC Banking Unit (IBU) makes the investments in permissible Indian securities. Income generated by the IBU on such investments is chargeable to tax as capital gains (i.e., referred to in section 111A/112/112A), interest and/or dividend within the parameters of section 115AD. After the payment of tax, the IBU passes such income to the holders of ODI. Presently, under section 10(4E) exemption is available only on the income generated on the transfer of ODIs and not on the distribution of income to the non-resident holders of ODI. Consequently, distributed income is taxed twice in India (i.e., first when received by the IBU and second, when the same income is distributed to non-resident holders of ODI.

• Amendment – Section 10(4E) has been amended (with effect from the assessment year 2024-25) to remove the double taxation. After the amendment, exemption will also be available to any income distributed on the offshore derivative instruments, entered into with an offshore banking unit of an International Financial Services Centre. Exemption will, however, be limited to that amount which has been charged to tax in the hands of IFSC Banking unit under section 115AD. Mode of computation of exemption income will be prescribed by the Board.

6. Amendment to Section 10(4G)

Clause (4G) was inserted by the Finance Act, 2022 (with effect from the assessment year 2023-24) to provide exemption to any income received by a non-resident from portfolio of securities or financial products or funds, managed or administered by any portfolio manager on behalf of such non-resident. This exemption is available only if income arises in an account maintained with an Offshore Banking Unit in any International Financial Services Centre. However, the exemption is limited to the extent such income accrues or arises outside India and is not deemed to accrue or arise in India.

1. Rebate under section 87A is available in the case of a resident individual if his/her taxable income does not exceed Rs. 5,00,000. The rebate has been discussed in para 270.
2. Rebate under section 87A is available in the case of a resident individual if his/her taxable income does not exceed Rs. 5,00,000. The rebate has been discussed in para 270.
3. These provisions are given in paras 531 to 559.
4. Rebate under section 87A is available in the case of a resident individual if his/her taxable income does not exceed Rs. 7,00,000. Rebate under section 87A is subject to marginal relief from the assessment year 2024-25. If net income exceeds Rs. 7,00,000 but does not exceed Rs. 7,27,770, income-tax on such income cannot exceed the amount by which the net income exceeds Rs. 7,00,000.

3a. Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given under section 115AD(1)(a)], the rate of surcharge/health and education cess is nil (for the assessment year 2024-25).

3a. Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given under section 115AD(1)(a)], the rate of surcharge/health and education cess is nil (for the assessment year 2024-25).

4. “International Financial Services Centre” means an International Financial Services Centre which is set-up in a special economic zone and approved by the Central Government under section 18(1) of Special Economic Zones Act, 2005.

3a. Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given under section 115AD(1)(a)], the rate of surcharge/health and education cess is nil (for the assessment year 2024-25).

3a. Where the total income of a “specified fund” [as referred to section 10(4D)] includes any income in respect of securities [as given under section 115AD(1)(a)], the rate of surcharge/health and education cess is nil (for the assessment year 2024-25).